Question

A power surge sparks a small electrical fire in an office building. The electrical fire triggers the automatic sprinkler system and the water from the sprinklers, soaks the carpet and shorts-out all the computers, causing thousands of dollars in damage. The office must close for two months during repairs. The cost of renting a temporary office space while the physical damage to the office building is repaired is considered:
Answer Choices: Select the Correct Answer
An indirect loss.
A physical loss.
A direct loss.
An occurrence.

Answer 1

The cost of renting a temporary office space while the physical damage to the office building is repaired is considered an indirect loss .

Explanation:

The indirect loss occurs when a direct loss occurs when no broken goods can be used. The expense to rent temporary retail space is an unintentional cost, often referred to as a substantive loss because the destroyed space is useless.

Revenue lost from a direct loss as a result of a fire in its facilities that a business cannot market its products.  

If expressly included with the cost of the extra premium incidental risks are not protected by ordinary scheme policies. Notice also lack of effect.